Objective Economic Analysis

Economics is understood as the systematic study of the way scarce resources are allocated and utilized. Although it is considered a social science, economists ideally aim to be as systematic and objective as those working in the physical sciences. Objective economic analysis is usually carried out using mathematical models relying heavily on calculus, statistics and other fields of higher mathematics.

Objectivity as Empirical Observation

The word "objective" usually refers to the use of empirical observation as a method for accumulating knowledge about the world. In economics, objective analysis consists of observing economic actors and markets and gathering data about their behavior. This information is then used to create models that can help discern the value of scarce resources, as well as how they are being allocated.

Modeling

Economic data is used to construct mathematical models. These models illustrate the way in which the allocation of scarce resources, such as goods and services, actually happens. For instance, the basic economic model known as the demand curve can be used to predict how the cost (value) of something can change based upon how much of it is available (supply) and how many people want it (demand). Thus, a simple model of supply and demand can be used to predict how much people are generally willing to pay to get their hands on something scarce.

Positive Analysis and Normative Analysis

Economists like to distinguish between positive economic analysis, which is considered highly objective, and normative economic analysis, which is considered less objective. Economists often analogize positive economic analysis to theorizing in the physical sciences. Positive economic analysis tries to discern a set of theoretical principles that articulate the actual allocation of scarce resources. In other words, it simply attempts to show things as they are. Normative economic analysis is considered less objective because it tries to use positive analysis to predict how changing laws, regulations and other economic factors will affect society. A normative analysis ultimately tries to make a judgment call on whether or not such changes would be beneficial to society on the whole. It is not content simply to see things as they are, but how they could and perhaps should be.

Ceteris Peribus

"Ceteris peribus" is a Latin term used by economists to describe the timelessness of their models. Translated, it means roughly "all other things remaining equal" or "all else staying the same." Since economic activity is usually very complex, economists bracket out as much extraneous information as they can to get a clearer view of an economic phenomenon, problem or event. This rule is intended to make economic analysis as succinct and objective as possible.

Critiques of Objective Economic Analysis

Since economists are reliant upon what are oftentimes highly abstract mathematical models to represent events grounded in human behavior, there have been many critiques leveled against economists' claims to objectivity. For instance, some claim that mathematical models representing reality almost never capture the many complex causes and effects of economic phenomena in their entirety. Economists generally rely upon oversimplified assumptions that lend themselves readily to mathematics, but do not reflect the complexity and unreliability of real human behavior. It has also been argued that that these assumptions are so taken for granted that they constitute a kind of orthodox dogma rather than true objectivity. Still others think that that severing economics from its roots in social events and politics has sterilized the field; they desire a return to the theoretical study of "political economics."

References

• Introduction to Economic Analysis